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Over the last 18 months, the AEI-Brooking Paid Family Leave Working Group has studied and developed approaches to policies that would assist employed men and women in balancing the competing responsibilities of work and family life. During the first year, we focused on parental leave — time off work following the birth or adoption of a child — and reached a compromise proposal that would supply minimal amounts (up to eight weeks) of such leave to mothers and fathers. The proposed program was designed to keep the costs to the government (and ultimately the taxpayers) fairly low and to avoid imposing substantial burdens on employers, while still assisting employees.
This year, we have broadened our consideration to include time away from the job to care for sick family members (family care leave) or to address the employees’ own health problems (medical leave). Program design for family care or medical leave is more complicated than for parental leave for a variety of reasons. Whereas parental leave takes place following a clearly definable and observable event (birth or adoption of a child) and for most individuals occurs only a small number of times during the work life, the need for medical or family care leave is less easily observed or verifiable by employers and can take place frequently for some employees. A related point is that it will not always be clear what constitutes a reasonable basis for taking time off work while receiving government financial assistance.
An example helps to illustrate these complexities. Consider a 50-year old who has a parent with diabetes requiring 10 hours of weekly care from the adult child to manage the medical condition. Does this constitute a sufficient reason for taking time off work? And, if so, how much? Quite probably, some or all of this care could be provided outside of work hours. However, doing so will likely create time stress for the care provider. And, empirically, we know that daughters more often than sons are the ones who end up assisting their parents. So if this help is provided outside of work hours, the caregiver will likely be tired at work and stressed outside of it, possibly leading to worse labor market outcomes. These issues also affect employers. Since the employee’s care responsibilities are not directly observable, the employer will have a difficult time separating legitimate needs for leave from cases where the employee is seeking time off work for other reasons. Requiring physician verification of need helps to alleviate the problems but is unlikely to eliminate them.
Such complexities must be considered when designing paid leave programs. One question is whether parental leave should be combined with family care and medical leave into a single program, or if it would be better to separate them. Answers to this question may be partly political, as there may be more support for enacting a consolidated program than two distinct ones. Indeed, an attraction of combining coverage is that it addresses a wider set of needs and a more diverse group of employees. We all face the possibility of experiencing our own serious medical problems and many of us will eventually have relatives (aged parents, children, or spouses) with health issues requiring our help, whereas only some workers are at “risk” of becoming new parents. On the other hand, in a world without political considerations, the “ideal” parental, family care and medical leave programs might have different structures and characteristics.
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Several design differences between parental leave and family care and medical leave might be considered to address the potential uncertainties about when use is justified and to alleviate potential employer burdens. One promising possibility would be to require a waiting period of one-to-two weeks before family or medical leave payments begin. This creates an impediment to overuse of the leaves, in much the same way deductibles for home or auto insurance reduce the frequency of small claims, while still providing protection from large risks. In addition, a waiting period would potentially decrease the costs to employers of coordinating coverage of work responsibilities resulting from frequent and unanticipated short leaves. However, doing so increases the burden on individuals with legitimate needs for time off work, and it may be desirable to provide an exemption to the waiting period requirement for short verifiable medical emergencies (e.g. those requiring hospitalizations).
An alternative is to cover medical and family care leaves for shorter durations or at lower wage replacement rates than those for parental leave. Once again, this reduces the incentive for individuals to take family care and medical leave, reducing potential burdens on employers and the revenues needed to finance the program, but it may penalize workers with genuine need for leave. A third possibility would place limits on the total amount of medical or family care leave that could be taken over a period of several years. For instance, if partial payment were received for up to eight weeks of family care or medical in a given year, this might be combined with a maximum of 16 weeks of paid leave for these reasons over any four-year period. The combined amount of leave received for parental, family care, and one’s own medical needs could also be restricted to a shorter period than the individual maximums.
Some of these types of limitations are already being implemented at the state level. The District of Columbia’s paid leave program, to take effect in 2020, will offer 8 weeks of parental leave annually but just 6 weeks of family care leave and 2 weeks of leave for one’s own health in a given year. Similarly, Washington state’s recently enacted program will grant rights to 12 weeks of annual leave each for parental, family care, or individual medical reasons, but it generally limits the total amount from all of these source to 16 weeks in a year.
All of these possibilities have the potential to reduce both program expenses and the inappropriate use of leave but at the cost of decreasing the coverage for needed time off work. Such issues are common in the design of insurance programs (with leave here being considered a type of insurance), where the economically optimal level of coverage trades off providing the maximum protection against risk (the purpose of insurance) against the potentially high program costs due to overuse that occur when individuals are fully insured. These dilemmas are not easily resolved.
Fortunately, we do not have to construct the perfect paid leave program (or programs) to improve upon the current situation. Indeed, taking even small steps in the right direction would represent significant progress. Also, there are many characteristics of paid leave programs that are likely to be common across the different potential uses. For instance, all such leaves should be job-protected to the maximum extent possible and offer the broadest possible employee coverage while being financed using mechanisms that minimize labor market distortions.
Christopher J. Ruhm is a professor of public policy and economics at the University of Virginia.
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